Mike Siegel, who oversees about $190 billion at Goldman Sachs Group Inc.’s asset-management arm, said insurers should stick with hedge funds even after their recent slump, because the industry needs investing strategies beyond low-yielding bonds.
“All asset classes have their day in the sun and their day in the shade, and this may be one of those times, a day in the shade,” Siegel said of hedge funds Wednesday in a televised interview with Jonathan Ferro and Amanda Lang. “I can’t say the model is dead, I just don’t believe that.”
American International Group Inc. and MetLife Inc., two of the largest U.S. insurers, disclosed this month that they’ve submitted notices to redeem billions of dollars from hedge funds after declining results squeezed profits.
Warren Buffett said April 30 that investors are paying unbelievable fees for hedge fund strategies that have failed to keep pace with index funds that track the S&P 500.
The first quarter of this year was the worst for hedge funds since 2008, according to Hedge Fund Research. Siegel said some strategies such as merger arbitrage have been facing pressure as high-value deals have been called off. On Tuesday, a U.S. judge blocked the proposed combination of retailers Staples Inc. and Office Depot Inc.
Siegel, who is head of insurance asset management for New York-based Goldman Sachs, said hedge funds should still be part of his clients’ portfolios because their performance isn’t highly correlated with stocks and fixed-income securities. Government bond yields are negative in much of Europe and Japan, and stocks are trading near record highs.
“By the way, we’ve had periods of time when you’ve bought 30-year U.S. government debt and regretted that,” Siegel said, adding that stocks lost about half their value from their 2007 peak to the low of 2008. “So, there’s a rotation that takes place.”
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